-- Posted Friday, 9 October 2009 | | Source: GoldSeek.com
Commentary
Sometimes you miss a market move or part of a move. I have as I was counting on gold moving down in early October, which it didn’t do. Given this is but October 8th, the door is still open for an October price correction. This is not what I was expecting to occur at the end of September, but the seasonal bias is still in play as you’ll see.
Gold looks as though it is following its 15-year pattern, which typically calls for a spike high in the first third of the month. Given the current rally, I expect to see this spike at anytime. No, I don’t want to get short. I want to use a price break to get long.
The driving force behind gold’s move has been and still is the declining Dollar. If the economic picture in both the US and our trading partners continues as is or improves, my expectation is for the Dollar to lose its role as gold’s catalyst. Inflation themes should eventually take over that role.
What is important is that another catalyst is in place to eventually drive prices even higher than they go now. If I am right, there is plenty of opportunity left in gold.
Seasonal Story
The Seasonal Chart below is shown with permsission of the Moore Research Institute.
You can view their website by going to: http://www/mrci.com
I thought and expected gold to peak around the first of October. I was too early in my thinking as prices have continued higher. This current up leg fits in very well with the 15-year seasonal trend, not the 35-year seasonal trend.
US Dollar
The Dollar continues to plummet. Prices today hit my near term downside target, the Bollinger Band Low of 75.770.
Stochastics remain embedded. For those that don’t know, I use the Stochastic Study to measure whether a market is: Overbought, Oversold and getting a stronger trend. Embedded means getting stronger in the trend direction. This occurs as the study locks in, or in plain English, “embeds”. Until this condition is lost, rallies are in my opinion, selling opportunities.
I see the Dollar falling in large part because investors have become comfortable with the idea that a world wide economic recovery is at hand. As such, opportunities in higher paying currencies are where the “hot” money is moving. At the first sign of trouble investors will shift some funds back to the Dollar, causing the Dollar to rally. However, for the Dollar to turn its trend up, according to this chart, it will take a close over 78.62 to occur. Until that occurs, I don’t see a trend change taking place.
Daily Gold Chart
Last week had me thinking that gold had temporarily topped out against the 1025 price level. That proved wrong, but nothing was lost since I never said to get short. Rather, the long positions I had recommended were liquidated too soon.
I realize that a buying frenzy has taken place in the last 5-days.
On October 2nd prices hit a low of $987 an ounce. Today prices hit $1062.70. The temptation is to jump in, thinking you “missed the boat”. My belief is that you haven’t.
Whether you end up buying higher or lower, the chart picture should be taken into account. Right now Stochastics are overbought and the Dollar risk back to the current break low very large.
Seasonal Studies still point to October having either a price or momentum break by month’s end. If that occurs, I intend on using it to buy into.
Trade Recommendations
My expectation continues to call for a late October buying opportunity. Chasing prices is not something I recommend, regardless of the outcome.
Right now, I am out of the gold market, waiting for an opportunity to get long.
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Disclaimer: This publication is strictly the opinion of its writer and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is taken from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures and Options on Futures trading involve risk. In no event should the content of this market letter be construed as an express or implied promise, guarantee or implication by or from The Ira Epstein Division of The Linn Group, Inc or The Linn Group, Inc. that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are no indication of future performance.
-- Posted Friday, 9 October 2009 | Digg This Article | Source: GoldSeek.com